Broadbandindia Magazine

The Department of Telecom (DoT) has postponed the auctions for third generation mobile spectrum by two weeks to January 30. It was earlier announced that   the auctions would take place on January 16. The auction for broadband wireless spectrum has also been pushed back.

According to Government sources, the auction has been postponed since DoT is yet to get approval from the Cabinet on two important decisions related to the 3G auction.

DoT has sought Cabinet’s nod on its proposal to limit auctions to five berths in each circle. Cabinet’s approval has also been sought because DoT over ruled a proposal from the telecom regulator to impose additional administrative charges on 3G players. These decisions were taken by the Telecom Commission on December 19.

The Commission rejected the proposal from Telecom Regulatory Authority of India (Trai) to impose and administrative fee on 3G operators saying such a move may impair the revengue collections from the upcoming 3G spectrum auctions. According to the Commission, the move may result in the revenues affected by as much as Rs. 5,000 crore.

The Cabinet Committee on Economic Affairs (CCEA) is expected to take up these issues in its next meeting. DoT officials also said that some of the prospective bidders have also sought more time to understand the auction rules.

A source said that the auctions could be postponed beyond January because, in all likelihood, the CCEA would constitute a sub-committee to examine the issue of 2% administrative charges on the highest bid amount on a recurring basis. The same was proposed by the Trai. A cautious communications & IT minister A Raja, however, wants CCEA to vet the proposal this time, as he has been under fire for tweaking Trai proposals.

However, officials said CCEA would not like to hurry through the proposal since the Trai has done an elaborate exercise and specifically cautioned that the recommendation should be accepted in its entirety, and not cherry-picked.

“In all probability, CCEA might reduce the charge from 2% to 1% rather than scrapping it altogether”, an official said.

The pre-bid conference, held on December 23, was skipped by almost all major international players, since it is pointless to join the bids till all contours of the policy are in place.

Industry divided

The industry is divided over the timing of the auction. While some of the CDMA operators including Reliance Communications do not want the auctions to be held now, existing GSM players such as Bharti Airtel are keen to go ahead. Some of the foreign players also want the auction process to be reviewed since the current policy is seen to be not favourable to them.

What has made 3G auctions unattractive for new, foreign players is the government’s flip-flop over 2G spectrum allocation to them. The earlier official stand was that 2G spectrum could not be guaranteed for all players, though they would be free to offer all forms of service. But as a lastditch attempt to sweeten the offer, on December 23, member, finance of the Telecom Commission, announced that all players would be granted 2G spectrum once the needs of the incumbents are   met. In this scenario, new players would rather wait than take the plunge. A few players have also sought a delay on account of the existing credit crunch. However, the Government wants to go ahead with the auction before the end of its current term. It is expecting to get revenues of over Rs 20,000 crore from the auction, which will help the Finance Ministry to bridge the budgetary deficit. Most of the equipment vendors and chip makers including Ericsson, Intel, Qualcomm and Nokia Siemens are backing the Government to push through the auction.

According to the revised schedule, the notice inviting tenders will be issued on January 9 and the last date of submitting applications by prospective bidders will be January 15. Mock auctions are likely to take place on January 27-28. This is the second time that the DoT has changed the auction dates.

If there are any further delays then the auctions may take place only after the general elections, which will push back India’s entry into the next generation telecom services by at least a year.

Meanwhile, State-owned BSNL and MTNL have been given 3G spectrum ahead of the others and they have already announced plans to launch 3G services in early 2009. A delay in 3G auction could also impact the PSU’s rollout plans as private operators may object to them getting a one year lead in terms of offering services to consumers.